Skip to main content

About this Show

Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

NETWORK

DURATION
03:00:00

RATING

SCANNED IN
San Francisco, CA, USA

SOURCE
Comcast Cable

TUNER
Virtual Ch. 58 (CNBC)

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
704

PIXEL HEIGHT
480

TOPIC FREQUENCY

Us 28, Europe 22, Hp 15, Meg Whitman 15, Nordstrom 13, Google 13, China 12, U.s. 12, Apple 11, Dell 9, Jim 9, Aig 9, Darden 9, Faa 8, America 8, S&p 8, Boeing 7, Simon 7, Italy 7, Whitman 6,
Borrow a DVD
of this show
  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    February 22, 2013
    9:00 - 12:00pm EST  

9:00am
mornin 24 hours. zero heartburn.
9:01am
welcome back, everybody. let's get back to our guest host for the last word. jim, you said at the very top of the show, that in your opinion, the fed has accommodated and the net policy will stick around for some time to come. >> the last word here, i want to mention one thing we haven't talked about today, which is that the fed presidents all signed a letter on money market mutual fund reform. i think that's an important statement. and a big risk is still out there, i would like to see that reform get moving. >> jim, thank you so much. glad to have you here.
9:02am
make sure you join us on monday. right now time for "squawk on the street." good friday morning. welcome to "squawk on the street." i'm melissa lee, with scott wapner and james cramer. carl quintanilla is on assignment and david faber is in palo alto, california, getting ready for his big interview with meg whitman. it looks like a comeback. dow looking at 89 right at the open. look at the picture in europe. this is really being driven by those eco numbers, giving stocks a bounce. despite forecasts that the euro area economy will see back-to-back years of contraction for the first time. of course, now the focus turns to the weekend's italian elections. overnight in asia. shanghai is closing out its worst weekly loss in two years. nikkei managing to close higher. road map this morning starts
9:03am
with the markets. we' results from aig and upgrade for home depot helping stocks today, and hewlett-packard. >> hp is popping pre-market on the back of the earnings. sigh of relief for the investors as the company showed some progress with its turn-around. david will have the exclusive with meg whitman in just a few minutes. >> more signs of consumer trouble. nordstrom gives a weak outlook. darden revising lower its outlook for the year. we start off with the markets. pointing to a big rally today as the market recovers from fears that the fed will halt its easing process sooner than expected. this after stocks post their biggest two-day drop of the year, closing at two and a half-week lows in the heaviest vim trading day in 2013. >> i feel that there were some calls yesterday on dennis garvin
9:04am
saying 100% cash. that kind of call i think will be tested. i think there's a mix the pictu picture. what's developing, good news, bad news. the 100% cash call, which i think shocked the market, may not hold off on the daily today. >> it seems to overreact to anything fed. the minutes happened a month ago, january 3rd, we all got spooked, it sold off. that was a negative feeling in the market. a couple days ago, minutes come out, market gets spooked and here we are higher today. >> the german confidence numbers, for many -- for 30 years i didn't care whether the germans were confident or underconfident. >> who cared if they felt good or bad. now it's the end all, be all for how the european stocks do. and therefore, how we here in the united states do. >> exactly. and i think that what happened is in the last couple days, we started getting gripped again by china. maybe china's not strong enough. very worried about europe. then you add those on to the fed minutes and think, wait a
9:05am
second, doesn't the fed know there's a gasoline -- that there's a run, a speculative run? doesn't the fed know about this? where are they? >> the irony of the fed minutes is they said they should consider changing the pace of qe, so if the economy's better, right, they'll pull back qe. or if there are questions about the efficacy of the program, in which case it doesn't matter if they're in there, because it doesn't work. so either way, it would be good in theory. >> what i thought was disheartening, for a couple of weeks we were focusing on stocks, on companies. >> m & a, right? focusing on the pickup in m & a. >> and then we see, oh, no, it's not the pickup in m & a, it's the spanish banks. aren't you worried about berlusconi? i am not going to go back into a world where all i care about is italian unemployment. just not going to go there. i worry about our unemployment,
9:06am
so does bernanke. >> it proves again, to the fed, the minutes are old news. bullard exclusive on cnbc, comes out and says, we're easy, and we're going to be easy. don't worry. the punch bowl's not going away. you can still drink. it's okay. >> that's extraordinary. we've heard him go the other way. now, can he get people in washington to not talk today? >> good luck with that, jim. >> that's always my worry, that they have mouths, microphones. >> you have the sequester fast approaching. >> we should put up a countdown clock. >> that's coming. >> what, are you not worried? you better start worrying right now, partner. >> i'll climb my own wall of worry. >> stop worrying about the
9:07am
ballet, and the guys on the ice. >> that's a different conversation for another time. >> fear matters. >> hewlett-packard trading higher in the pre-market after better than expected quarterly results. the company reporting second-quarter results and a forecasted above expectations as it cut costs under ceo meg whitman's turn-around plan. david faber is live at hewlett-packard hq in palo alto, california, where he'll be speaking with meg whitman in a few minutes. >> thanks, scott. the stock looks to be up. i heard you mention a number of analysts deciding to raise their price targets after the conference call yesterday. although, interestingly, hewlett-packard did not adjust its own number in terms of what it expects to earn per share for this full year. despite what was, as you said, a better first fiscal quarter and pointing to a bit better fiscal quarter, at least than the analysts who followed the companies it anticipated. it is not as though there are still signs of weakness.
9:08am
certainly the pc business, certainly what we'll talk to meg whitman shortly about as well, continue to show signs of deterioration. how do you manage these painful transitions is a key question for hewlett-packard. as it is still dealing with all of the key sectors seeing revenue declines. now, that's not a surprise. whitman has pointed to that for 2013, talking about 2014 as a year in which you may start to really see growth yet again at the company. and so many people embracing that number from yesterday. at least saying, hey, you know what, things aren't quite as bad as we perhaps had thought. certainly a lot better than they were last quarter when we were dealing with that fraud and autonomy, enormous writedowns and lots of other questions, including the deterioration of the underlying business. we'll talk more about that, and the enterprise group and get a sense as to what's going on in europe and china very shortly. back to you guys. >> david, we'll certainly look forward to that interview with meg. do you have the feeling the turn-around is taking hold as
9:09am
the bulls are sort of trying to spin that story forward this morning? >> stuff like the beating of the comps, they talk about how the data center coming on, storage coming on, printers coming on, then you have what really happened, printers down 5%, storage down 4%, data center, storage down 13%, data center not doing all that well. >> margins contracting in everything but printers. >> right. it's kind of, look, we're doing well, you just keep seeing the soldiers being killed. >> not terrible is the new good for hg. they're expecting the worst from hewlett-packard. they're looking for signs of deterioration. the analyst from evercore said it wasn't a deterioration into nothingness. >> it doesn't take much at this point. >> you still take a look at the higher value segments of the business, the software business, what is supposed to be the savior of hewlett-packard and those were down year on year. >> we're not going to fade into
9:10am
darkness. >> i guess the tone on the desk is a little negative towards the results, obviously. what is it going to take for that story to start actually really being better, real better? >> they're not going to break it down. >> up 2%. >> cash flow. >> could they get rid of all their debt? that could be an incremental positive. >> the fact that it's a free-flow interview with david out there. >> that interview is straight ahead. faber's exclusive with hewlett-packard ceo meg whitman. we'll get her first reaction to the company's first-quarter results next. looks like the futures are going to be a nice open on the street. dow looks at an implied open of 79 points, or thereabouts. nasdaq getting a nice rebound after a new day of selling. ♪ [ male announcer ] to hold a patent that has changed the modern world...
9:11am
would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. ♪ to hold over 80,000... well that would make you... the creators of the 2013 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. see your authorized mercedes-benz dealer for exceptional offers financial services.
9:12am
9:13am
let's get back to david, who is at hewlett-packard headquarters in palo alto, california, with an exclusive interview with the ceo meg whitman. david? >> thanks very much, melissa. as you said, we're here in the headquarters. the building has been redone a bit. thank you for having us and hosting us. meg, yesterday, at the conclusion, or near the conclusion of your prepared remarks in the conference call, you characterized the quarter and sort of hewlett-packard as saying the patient showed some
9:14am
improvement. what exactly does that mean? >> well, i think it's accurate. we put down a very good deposit towards our full year performance that we have told the street would be $3.40 to $3.60. we beat the -- the high end of our guidance by about 11 cents a share. there were very bright spots in our performance. but we've got a long way to go. i'm clear, this is a multi-year journey to the turn-around. >> and throughout your comments, the prepared comments, even in the q&a, you've said it in our interviews as well, multi-year, you continue to say that. anything changing your opinion as to how long this will take? >> no. i think last year we characterized as a diagnosis, and laid the foundation year. we really needed to understand exactly what the challenges were and what the opportunities were going to be, and lay some pipe to set us up for a better 2013 in terms of products that are introduced to the market, our go-to-market, our relationship with our channel sellers. you probably know the channel
9:15am
really builds hewlett-packard. we'll see revenue acceleration as we go into 2014. >> why not have increased guidance, and guided the analysts to a higher number than they anticipated for the second quarter. >> we do feel very good about certain parts of our business. but we also face some headwinds. first of all you mentioned in your opening, the pc business faces some challenges. we should talk more about that. europe is a very tough economy. and we have the highest market share in servers of any competitor in europe, so when europe is soft, we're disproportionately hurt in that business. so we thought it was better to not get out over our skis, you know, one quarter we got three more to go, and we want to make sure we're cautious, and this business changes very rapidly. >> indeed it does. let's get to pcs, because there the changes perhaps happening more rapidly than some had anticipated. sales to consumers down 13%, sales of pcs and notebooks
9:16am
deteriorating quite rapidly, more rapidly than you anticipated. this is a painful transition. how do you manage it and what do you tell people to expect when you're just talking about a unit that does 10% of your operating profit, at 2.7% margins? >> yeah. so there's a couple of reasons we really like this business. and first of all, there is a huge transition taking place. the reason we've never called this business the pc business, we call it the personal systems business. it's an important difference, because if you're just talking about pcs, versus everything from virtual desktops to work stations to desktops, more traditional desktops to laptops to hybrids to tablets all the way to smartphones, that's the personal compute. perm compute is growing. everyone wants to create, consume and share. so we like the overall market. but there is a transition from more traditional form factors to
9:17am
new form factors. there's also a transition from really one operating system to multioperating systems. >> what is this going to look like if in fact you get it right? not saying you necessarily will, because managing these kinds of transitions are somewhat unique. we simply have no idea whether consumers are ever going to buy a pc or notebook again. >> at hp, we've got to reallocate resources just from our pc business to the mobility business, to -- from one operating system to multi operating systems. we have to allocate some more resources to services. because profit pools are shifting here. think about what's happening with devices. i mean, i don't know how many devices you have, i have four. so how you manage those devices, how you manage that convergence. security, hp knows more about balancing access with security than any other company. and here's the other reason why this is an important business to us, no one knows more about computing than hp. and it's a core dna, part of a
9:18am
dna of this company. so we like being able to go from the device to the data center. but it's a tough transition to manage. but you know what's great about technology? if you miss one trend, there's another one right around the corner, and the development cycles and the speed at which this is moving is incredibly rapid. >> you appreciate that speed, and can you stay with it. >> yes. >> there are many investors saying you're doing $8 billion a quarter, a tiny margin. it's not a big part of your business anymore, get rid of it. >> but it's a strategic part of the business. you know, there's a lot going on in technology. this is some of the biggest shifts in technologies that i've seen in my career. you know, about every five to ten years, there's a big shift, whether it was from the main frame to the client server environment, server to web 1.0, to what i would characterize as 2.0 web services. we're going through another sea change in terms of how technology is bought, how it's
9:19am
paid for, how applications are developed. we happen to have a fantastic set of assets that i think positions us incredibly well. my predecessors, even through all the turmoil, really assembled a terrific set of assets that will allow us to take advantage of what i call this new style of i.t. we're the only company that can go from devices that connect to this new style of i.t. to hardware to software to services, that i think can position hp incredibly well in the next big technology way. >> do you feel like you're able to measure everything you want to do? we all look on wall street at signs of progress being, well, will you spend the revenue, how is the stock price doing, earnings per share. what do you look at to really gauge progress that you've made? 18 months, 16 months since you took the job. >> yeah. >> can you measure everything you need to to figure out whether you're making progress? >> the first thing i look at is products. hp is going to come back on the foundation of break-through
9:20am
innovative products that customers really want, that help solve our customers' toughest problems. i think if you talk to most people in the industry, i was at our partner global conference earlier this week in las vegas, and we had the top 2,100 partners at that event. they said this is the strongest product line up we've seen in hp for ten years. >> in ten years, one of the criticisms is innovation is no longer something we think about when we think about hewlett-packard. what do you see as a real innovation for this company? >> first is in our enterprise group. your listeners should know it gives us 43% of the profits of hp today. i don't think most people don't understand that. >> they still just think printers and pcs. >> exactly. for example, we'll start shipping in march a revolutionary new server technology called moon shot. which is effectively servers that are built on arm chips and atom chips. almost the same chips you have in your cell phone. so much less space.
9:21am
92% less space, 86% less energy, and half the cost. so this is revolutionary. and we started taking orders. you'll be interested to know, our first order came from a company in japan. the reason why? japan lost 25% of their grid from the tsunami. i was in japan last summer, and the office buildings were only being cooled to 84, 85 degrees, because they don't have the grid. so this kind of product is revolutionary. and should allow tremendous break-through in hyper scale computing, high tense di computing that schangs the game. that's the kind of thing hp is known for. >> and transitioning into that business as well, parts of the server business are in decline. convergence are in ascent. this is a deal that was done quite some time ago, where you fought with dell. that's another transition that's painful and uncertain that you have to manage in addition to
9:22am
the pc business. >> when you run a big technology company like this, there are these transitions. i think because much the change of the ceo, and the sort of drama that happened at this company, those transitions maybe weren't managed as well as they could have been. but that's part of being in the technology business. you're managing products that are new and changing the games. three-par storage was called converge storage. it was simple architecture, better storage than anything on the marketplace. but we have our traditional storage products that are declining. we've got to get three par bigger than our declining products and all of a sudden we'll have a growing storage business, which we're confident it will. >> we talked a great deal about autonomy last quarter. certainly don't want to dwell on it. but i'm curious, where is the investigation, in your opinion? there were a lot of questions at the time, well, is it really everything you're saying it was? or was it more just
9:23am
hewlett-packard screwing it up, my words. where are we on that investigation? is there anything you can point to? >> yeah. well, you recall at the end of last quarter we took a writedown on autonomy. we said, listen, there were misrepresentations of the financial condition of the company. and so listen, since then, we feel even more strongly about those allegations. and the department of justice, the s.e.c. and a number of enforcement agencies are taking up this case. and what i said last time is, we've done our work. we're going to turn this over to the authorities. obviously tell them everything that we know, that our internal investigation is ongoing. and then we've got to go back and run the company. and that's what i'm focused on. and i've turned this over to our very capable legal team. the wheels of justice turn slowly, but we're confident -- >> and finally, we're more or less out of time here. but we continue to here the
9:24am
murmurs, they should break the company up. it's unclear where these things come from. they aren't true, but do you feel like you have the full surt support of your board and the basic idea that this company is better together than it is apart? >> yeah, we do have the support of the board. and i am convinced that we should not break up this company. that we are better and stronger together. but in the end, obviously the financial results are going to have to underscore that strategy. and that's why we've laid out this multi-year journey to basically be very clear to people that we won't see revenue accelerating until 2014. and that will be on the backs of this excellent portfolio that is uniquely suited to the new style of i.t. so we're confident about it. but obviously everything is about execution. and we've got to continue to execute just as we did this quarter. >> meg whitman, as always, always appreciate you're agreeing to come on a. over 300,000 employees,
9:25am
operations around the world. ceo of hewlett-packard. back to you. >> the exclusive with the ceo of hewlett-packard. shares rising in the pre-markets trade. we should note that even though you're skeptical of the results in place right now, oi may be in place, ubs out with an upgrade. >> i think when you listen to the interview, what she's saying, listen, we're not just a personal computer company. i take that at face value. but i don't really know what happened to their terrific consulting business. that's got to come back a little. i did like this notion of enterprise, and we haven't lost our innovation. i think if you listen to that interview, you say, it ain't as bad as we thought. >> is that enough to be in the stock? i mean, if you had hp shares and you saw a 5% premarket, would your inclination be to hold on to the shares, but it could be a
9:26am
multi-quarter, multi-year, would you sell? >> no. the dell deal is in mind. she may say not break up. but there's always the possibility here that things get a little bit better in europe. this would turn. this company has not lost its entire basis business. >> do we have to consider the fact, though, that this is a multi-year journey, as meg whitman says, that this is tech, the hardest sector to make such a massive transition? because if you're looking at a multi-year transition, it's so difficult to forecast three to five years out about what's going to be taking place in tech. five years from now we know general electric will be making turbines and engines. in five years, what's going to be the hottest thing in tech? >> either way, you have a backstop on the stock. >> balance sheet a little better, cash flow good. data maybe a little better.
9:27am
>> all right. five minutes to go. before the bell rings. it is time now for mr. cramer's "mad dash" ahead of the market open. darden? >> you're going to see darden up. darden should be down, right? they once again said things weren't so good. they talked about the macro headwinds. you're supposed to say, we're not doing as well as we thought because of payroll tax increase, and gasoline prices. so they've got the script. i guess the script came out and it was that spielberg -- who did that, disney? what movie told you to use that script? the script is so prevalent people read it and say -- >> the problem with the dri is they have a different script every time -- they find a script. >> whatever macro is. in the end, it's just a no-growth story. and we want growth. and they don't have it. they just don't have it. >> red lobster -- >> down 7%. >> why does it always take
9:28am
forever for me to get into olive garden? why doesn't "mad money" get me in there? do you still stuff the rolls in your pockets like i do? >> alfredo sauce dipped in there. i'm just saying. >> the salad. don't ever underrate that. >> i would never. the final opening bell for the week just minutes away. more "squawk on the street" coming up right after the break. recognize me.
9:29am
but i am your market data. i know what you're looking for. i'm not chained to your desk anymore. i'm faster and smarter now. and so much less expensive. i am your market data. and if i do say so myself, i have never looked better. superderivatives introduces dgx. data done differently.
9:30am
[ babies crying ] surprise -- your house was built on an ancient burial ground. [ ghosts moaning ] surprise -- your car needs a new transmission. [ coyote howls ] how about no more surprises? now you can get all the online trading tools you need without any surprise fees.
9:31am
♪ it's not rocket science. it's just common sense. from td ameritrade. just a few seconds before the opening bell rings here on wall street. a lot to watch for on friday. we have the interview with meg whitman, and more potential deals in the works here. >> kkr knows that space very well. this is, again, the oil patches controlling. this is what i've been hearing. monterey is the next montego bay. >> they may not fit the setting
9:32am
too well. you're watching the opening bell, the s&p 500 at the cnbc realtime exchange at the big board, charles schwab corporation. uptown at the nasdaq, the x-1 company, maker of three-dimensional printing machines. >> talk about the run-up for the 3-d printing companies. take a look at 3-d systems, x-1 recently ipo'd. saying that this is the next frontier with a lot of commercial applications. >> i still worry that the less is merrier, not the more. listening to an israeli company this week saying they have the software for it. very hot group. >> are the ones yesterday, you brought this up earlier, jim, the gartmans, those who have called to go to cash, either all cash or get out of u.s. stocks, are they going to regret making that call at this point? >> i think those days are kind
9:33am
of over. we're not going to nationalize the banking system. the center will hold. this is not 1933, '34, where fdr comes in and he's worried about the left, he's worried about the right. we did have that feeling in 2008, 2009. those days of 100% cash, that's for traders, it's not for the people at home. >> not practical. >> no. >> can you imagine calling, i want to go -- all the cash right now, sell it all. >> listen, you've only missed your -- the dow at 6780 and you go 100% stock? you can do that. it's called whip saw. buy high, selling low. >> the last couple of days there was certainly a feeling in the market that we were perhaps on the cusp of this bigger pullback, and the s&p right now is still above 1,500. the dow is only 50 points or so away from the 14,000 level.
9:34am
>> right. >> yet again. it shows you, you need to temper all of these quick decisions that people so want to make. >> things are mixed. today i feel people say the sequester's off. look, i think it's not as good a time as it was a couple weeks ago. better time than it was a couple years ago. >> all right. let's look at some of the stocks that are moving. home depot, yesterday got smacked with the downgrade. today getting an upgrade from oppenheimer. now matching its ratings for lows. raising the price target for both of them seeing they're seeing demands, possibly accelerating. we're getting a lot of on the one hands, and on the other hands in terms of these stocks. >> that's such a great point. part of the note here is you could look at other stocks and say that, wait a minute, walmart, you could look at that, look at some of the other names
9:35am
and say, wait a minute, others are saying the spending back drop is not good for the discretionaries. >> your pipes break, you'll go buy another one at home depot. >> the consumer, that's discretionary, they don't even know what discretionary is. the thing that -- yesterday you had a great discussion about home depot in your show. stephanie link said, look, reports, the stock has had a big run. even if it is great, it may not be enough. we saw a lot of that. toll brothers is great. but was it enough. and toll, up -- what i'm saying is, i'm not calling all fear. you just don't want to call all fear. you just want to call all mixed. i think that people want to be extremists. they wanted to come on and they want to make that bold call.
9:36am
>> harry dent. >> harry dent, yeah. >> it's going to 20,000, and the next minute it's going to 600. >> a buckner. what did buckner do? >> bill buckner? >> yes. >> he was bullish until a ball went through. >> i just don't want to make that big bearish -- you don't want to have a buckner-like moment. that's a dangerous thing. those at home, probably the biggest month of our career. was there a worse month? >> no. >> i don't want to muff it. that's what a bold calls does. >> you don't want to buckner it. >> that's a good one. whenever you become a verb, that's pretty big. >> i just feel like you've got to be very vigilant about the idea that you don't want to sit here and say, you've got to sell apple. and then morgan stanley puts out a note that they could double the dividend. >> after speaking to the cfo, she says at morgan stanley, yet
9:37am
the stock doesn't do much. what does that tell you? i mean, i would think that would tell people perhaps maybe there's some sort of, i don't want to say bottom end for apple, but maybe that's the best thing for the stock right now. >> for a few days it got off. look, i'm going to throw away everything apple and buy chrome. >> making me feel like i should throw away my ipad, my desktop, itunes. i'm getting rid of everything apple as of this morning, including the apple watch, which i don't even have yet, and replacing that with a swatch watch. right now apple is like, to me, it's no longer that the apple -- nothing like the apple on your head. william tell overture partner. it's no longer positive. you could get hit by that arrow if the archer isn't careful. not everybody's the "hunger
9:38am
games." >> the day after einhorn held his conference with apple shareholders saying he could boost -- or his plan could boost apple shares by $150. >> you're at the epicenter of your show. is it more important to what the hedge funds say or what's happening at the company? is the company no longer important versus the hedge fund billionaire? i hear -- are there any -- >> apple's no longer the most loved stock in the hedge fund world. >> look at aig. you talked about it. >> aig is. >> aig is the most loved. i tell you, give me some loving. apple's not even on the top 50 of citi's new global champions. >> really? >> apple's not even on the list. >> holy cow. >> but the question is, why should it be on the list? >> coach is on the list. >> nine times earnings. coach is on the list? >> should go buy coach. buy a man bag. >> man purse. >> are we saying that on the
9:39am
list, which i have here somewhere, that apple's not one of the best 50? >> best 50 what, though? >> listen, maybe that's the bottom. >> coach, cummins -- >> i like cummins. >> ebay. >> i like ebay. >> speaking of watches, you can get a fossil instead of a swatch. >> listen, man, fossil, i told you yesterday fossil is going to determine whether that apple watch is better than the google glasses. >> google's on the top 50 list. >> i believe that. >> i'm going to 1,001 right now. >> where is brian white? >> right. that almost -- i don't want to say it topped the stock. when you start to get the really far out there price targets on apple, that's when the cracks in the story started to really -- >> look, here's capital oil and gas. one of the best performing
9:40am
stocks of the last few years. what's it doing? it's up five on a good quarter. the marcellus is good. you go back to the gardner denver. many things are happening that are positive that are away from apple. but if you just are apple centric, google centric, you keep people out of the oil patch. you've got to be responsible. you've got to be responsible and talk about things that are working. >> right. all right. >> oil patches, one of the best performances of a lifetime. do you care? >> i do. so does bob pisani. he's on the floor with more on what's moving. >> a nice move to the upside today. scott, did you notice, i'm sure you're watching jim bullard on our air this morning, saying the fed is going to stay easy for a long time. i got a lot of e-mails for that. bullard's considered a moderate. i thought that was an extraordinary statement. the big debate this morning is, what kind of slower period for the economy are we actually
9:41am
entering into and how is it going to affect stock? we've got kraft foods, burger king. we've got a couple of other companies commenting here. you said abercrombie, sales down. comps are much tougher because of the warmer winter season last year. but now people coming out and confirming that. that stock down about 2%. darden up 2%. they talked about the payroll tax increase and higher gas prices. nordstrom, very interestingly, guided below consensus for 2013. they didn't comment on the economy. a lot of people trying to figure out what's going on. the only thing i would note about nordstrom, all the department stores, they have underperformed almost everything. the overall market, even though the retailers, since the start of the year, i think they're being used as a source of funds for other things. just note that they're kind of stuck right now and have been, not just this week, but really since the start of the year. a lot of analysts turned negative, a lot of people talking about tom lee over at
9:42am
jpmorgan, says right now we recommend investors turn cautious and defer incremental purchases. a lot of people talking about market tops in the short term. a technical analyst said the markets may already have entered a correction phase. i'll make a simple observation on this. every time the s&p 500 gets 8%, 9% above the 200-day moving average, the market stalls out. it's hard to keep moving straight up like we have in january and february. we hit that 8% or 9% move over the 200-day moving average, it stalled out and did it twice last year, same time it happened. tough week for the overall markets. china's down 5%. this is the worst week in 21 months for them. melissa, home prices are going up there. report out overnight, clear indications that the chinese government is going to be very aggressive in trying to deal with that. that's a problem for the markets. >> hong kong already addressing it, bob. meg whitman sitting down minutes ago for an exclusive interview with our own david faber.
9:43am
david is with us live. david, your takeaway from this interview? >> you know, i think interesting, of course, that meg continues to defend the pc business, which this quarter did not have a good quarter. we said many times during the course of the interview about a vicious transition, one that perhaps is seeing deterioration amongst the willingness of people to buy pcs and notebooks faster than might have been anticipated. raises questions for the likes of dell, and a lot of.net on its balance sheet, and raises questions for hp. she gave her reasons why this business continues to be an important part of the whole at hp, despite producing only 10% of the profits of the company, and why she feels they can successfully manage this transition. it will be fascinating to watch. certainly i thought that was interesting. i think it's true, the board certainly supports her at this point. quarters like this one will only give her more credence in pursuing the turn-around and the idea that this company as a
9:44am
whole is better than in part. did want to add a few things we didn't get to, but meg and i were able to talk about off-camera, europe and southern europe in particular. very, very weak for this company. cfo kathy characterized it as dismal in the conference yesterday. nothing getting better in southern europe. in fact, meg said getting worse. something to keep in mind when we think about italy and spain and the likes. jim, what is going on there in europe. china, by the way, she's with you, she says it is getting appreciably better. seeing a great deal of progress in that market. the u.s. kind of bumping along. boy, we've heard that a lot, haven't we, guys. >> david, you're so right. there was enough to encourage me about china that i just kind of put europe aside. but that's probably a mistake, because the europe thing was supposed to be stabilizing. there was nothing in other comments about stabilization. >> no. and in fact, again, quarter to
9:45am
quarter, it got worse. and that -- those ink sales in particular, we talked to meg enough to remember things from past interviews, they can sometimes be a leading indicator to a certain extent, jim. and so i don't know if we're going to be revisiting europe every day again. i certainly hope that's not the case. but it can't be something that's just in the rear-view mirror, especially when you see companies like this that are bellwether companies for the world, and saying, things are getting worse. >> i thought it was a great interview. it obviously made the stock stronger. i think she told a strong case. great job, david. great job. >> thanks, jim. >> rick santelli at the cme group in chicago. go ahead, rick. >> good morning, jim. say hello to pop this weekend. as i look at 10-year and 30-year, let's start out with the longer maturity. interday 30, you can see we're coming back down towards 315. roughly ten basis points off of what was considered kind of the
9:46am
area of resistance in yields around 3 3/4. if you look at a two-day chart of 10s, you can clearly see we've eased back a bit. considering that the dow is coming back from -- or equities in general from a couple of days of squeamish downside, some would think later on in the session, maybe we'll get a bit of selling pushing yields up. traders are thinking they're going to stay right here, just under 2%. let's open this up a bit. let's look at the euro currency, and let's look at it over the time frame, well, going back to january. because we're very close to unchanged on the year. it started to move a bit lower after ltr 2 paybacks were very light. which goes to the weak european story. if we look at the yen, important. let's look at it for the month of february. it's correcting a little bit. yes, it's not going straight down. that's the dollar/yen. but remember, in several days, we're going to see a new head of their central bank. this could be big.
9:47am
abe-domics they're calling it. best levels since about mid-august. and we want to pay attention to this. because many think our central bank is hemming and hawing. now maybe it's the ecb's turn to ease, why? because yirp is the story. >> jim is so right. europe is the story. europe is more of a story than -- i don't want it to be. i want it to be america. it's just not working out that way. jackie? >> long time no see, jim. let's take a check on the energy prices. you're talking about europe. that's what was sending wti earlier. now that price pretty much flat, under $93 a barrel. still, the brent crude price is higher, above $114 a barrel. that price snapping a five-day losing streak. meantime in the rest of the energy complex, we're seeing gains in gasoline as well. the metals complex is lower
9:48am
across the board. copper continuing its declines after having its biggest single-day losing streak yesterday. it was briefly able to bounce into positive territory this morning. but not able to sustain those gains. of course, we're watching gold prices hovering around 1575 right now. telling me -- analysts telling me we could see a little bit of volatility in the gold picks today. we've got options expiration and the coming sequester, stronger dollar. we'll see what happens with gold. melissa, back to you. >> thank you, jackie. we're just one week away from the sequester when automatic spending cuts will kick in. will it really hurt the economy. one fund manager calling it a joke. hear what stanley has to say next. boeing has a fix for the dreamliner, but will the faa approve. if it doesn't, boeing could lose even more money. find out what it all means for the company as well as the stock. all stations come over to mission a for a final go.
9:49am
9:50am
this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. you are gonna need a wingman.
9:51am
and my cash back keeps the party going. but my airline miles take it worldwide. [ male announcer ] it shouldn't be this hard. with creditcards.com, it's easy to search hundreds of cards and apply online. creditcards.com.
9:52am
here we go. stanley is calling the automatic government spending cuts set to kick in at the end of next week, he argues the focus on the sequester is obscuring the real issue which is the exploding cost of entitlements. >> the hype over sequestration is a joke. sequestration is $85 billion. you're talking about a quarter of #% of gdp. >> drukenmiller said if it's not dealt with in the next four or five years, the interest rates are going to explode and the next generation is going to have a tough time. tough words. >> stanley's pretty good.
9:53am
i've known him for 25 years. >> we've got to deal with entitlements. what gives you any comfort that they've got the wherewithal to use a word that i can use on tv, in d.c. to actually do something about it. none, right? >> no, but i -- what happens if the tax receipts are really big this year? what happens if we get upside surprise of how much the government's already raised? why not take a pause, and kicking the can down the road, that's always been considered to be lacking in rigger. obviously worked in europe. why not do a little bit of improvement, and say, hey, look, let's just wait a bit until this economy keeps firming. don't be the reason why the economy doesn't firm. a lot of jobs created when the economy firms. >> that's a fact. find out why the white house is taking a page out of silicon valley's book and holding its own pac-a-thon. we'll be right back. ve embraced a new role. working behind the scenes to provide companies with services...
9:54am
like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business.
9:55am
9:56am
good morning. in the next hour of the program, we'll look at what nordstrom and darden are saying about the
9:57am
american consumer. we'll also meet the man who turned a broken iphone into a $1 billion business. scott, back to you. good morning. >> time for "six in sixty." six stocks in 60 seconds, give or take a few. the first one, jimmy -- >> they've got this very, very powerful anti-breast cancer drug. toxicity worries about it, but it's going to be a hot stock. >> isrg. >> there's a big debate, golden comes out and says buy it. you'll have -- there you can see, the shorts right now are losing. herbalife, you know how they work. >> steeple with an interesting call in auto zone. >> they're saying it's going to be a short fall. i've not made a lot of money betting against auto zone. >> wendy's? >> a new aggressive mcdonald's. credit suisse is talking about wendy's. near a 52-week high.
9:58am
>> bio marin? >> the great next drug company. that's a good story. >> the cat getting a call today. >> raymond james really making a difference here, saying, don't give up on cat. that's what people are doing. this is the worry about the market. should be up bigger. >> we did that in 60. have a great weekend. what do you have tonight? >> you know, i say something that's -- i was somewhat critical about this reit thing. i have an interactive show. you say something a little bit not so great about a company, the guys say, wait a second. you put them right on. maybe eat a little crow. i don't like to use salt anymore, so i put pepper on it. >> buckner, don't be bucknered. >> i love that. >> that's right. coming up, we're going to introduce you to the man who took a broken iphone and turned it into a $1 billion business. but first, it's been a roller coaster of a week for the markets. find out how you should be setting yourself up for the weekend. we're back after a quick break. [ male announcer ] i've seen incredible things.
9:59am
otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
10:00am
[ male announcer ] from the way the bristles move to the way they clean, once you try an oral-b deep sweep power brush, you'll never go back to a regular manual brush. its three cleaning zones with dynamic power bristles reach between teeth with more brush movements
10:01am
to remove up to 100% more plaque than a regular manual brush. and even 76% more plaque than sonicare flexcare in hard to reach areas. oral-b deep sweep 5000 power brush. life opens up when you do.. welcome back to "squawk on the street." we're live at post 9 at the new
10:02am
york stock exchange. let's get straight to the markets here. it looks like we're stabilizing after the first two-day stretch for the markets this year. let's bring in bill stone, chief investment strategist pnc investment analyst for his take on the markets. we're at a slight pause here, bill. you see opportunities for a pullback right now. why. >> just really simply because we've gone longer than we typically do without a pullback. and certainly, you know, as everyone's talked about, there's a couple things hanging on, more than a couple as usual, i guess, in terms of risks. i think you have to be cognizant of, we've gone a long way very quickly. and it's a normal part of the market to have pullbacks here and there. >> sequestration is one reason why. and also you mentioned the italian elections which are happening on sunday and monday. are you really serious that the u.s. investor should be worried whether or not pisani paks it in or not? >> i think you do. the way i look at it, two out of three of the outcomes are
10:03am
probably okay for the markets. one is good, which is that monti is part of the coalition and still running the government there. the second one is they can't really form a government and then they have to have another set of elections. that's probably going to lead to some volatility. though the negative one for the markets would really be berlusconi taking over power again. what you have to worry about as a u.s. investor is really that that starts up all those fears in the eurozone again. i don't think it would get as bad as we've seen in the past, but it could certainly stir some of those past fears. but the good news, like i said, two out of three of those, and those are the higher probability items, are really market neutral, to let's call the one obviously pos fif. >> so after the move we've had in the markets is the really strong powerful meltup and then the correction. which parts of the market do you believe are the most coiled springs in the event we kont get a problem in europe or the growth really returns here?
10:04am
>> well, i mean, the coiled springs, i would say it was interesting when we were thinking about where to position today. probably position a little towards less cyclical things. to answer your question, i would probably go to more cyclicals, areas that benefit from a stronger economy. >> is there any point in the future where the market -- i understand you've written a long note about the trading scale, between bonds and dividends, and whether there's a rotation or not a rotation. is there any point in which the market stops rewarding ceos for investing for growth and m & a? that would be a bigger rotation still. >> i think you're exactly on there. it's hard to necessarily express it all the time. part of our view on dividends is essence, you've got to focus on economies that can grow their
10:05am
dividends. exactly what you were saying, companies that are really investing for future growth, because that's what the growth that will eventually, or continue to drive dividends going forward. i actually think that is what the market is going to -- it has rewarded that. and i think it will continue to reward that. >> bill, where does the fed factor into all the conversation? there was the reaction clearly to the minutes. but we had bullard on our air exclusively today, basically saying we're not going anywhere, and we're not going anywhere anytime soon. >> you know, frankly, i think he was right on in terms of, i don't think they're going anywhere anytime real soon. what you saw is just normally a lot of discussion at the end of the day. we know the chairman generally drives where things are going, and i think we know where his head's at. i'm in agreement that i don't think that that was a reason that really the market should sold off a whole lot. in a normal day, if we hadn't had such a run before that, maybe it wouldn't have. i think that had as much to do with it as anything. looking for an excuse, frankly. >> i guess my point is, doesn't
10:06am
that put somewhat of a floor under the stock market? as long as market participants know that the fed is not going anywhere, doesn't that limit the scope, size, anything related to a pullback? >> i would think at least some. you know, particularly forget the fed, just the interest rates are so darn low. that's what i try to get to is, over the long term it's almost like there is no alternative unless you really want to guarantee losing purchasing power over time, sitting in the safe bonds, treasuries or cash. you know, it does tend to push assets over to stocks. and because i wouldn't say they're at all overvalued, i think it does add to some sort of a cushion there. the. >> bill, we're going to leave it there. thanks for your time. have a great weekend. >> you too. >> the point here is the sensitivity we saw yesterday. saying they would find it very difficult to actually rein in -- i mean, the two-day move was
10:07am
huge. on just a neutral bias. >> it happened a month ago, the same market reaction to virtually the same kind of language. just shows how sensitive everybody is to anything that the fed says. >> it speaks to the rally. we're looking for an excuse to sort of take a pause and profits ahead of the sequestration. >> you don't feel it's something more profound than that? if they think they're going to come back from qe? >> think about what they said. they said they'll change the pace of qe if the economy improves, which we knew, or they'll pull back on qe if it's no longer effective. if it's no longer effective, it doesn't matter if it's in the market. >> one thing's for sure, one of the standouts this morning is hewlett-packard. reporting second-quarter results and forecasts above expectations as it cuts costs. meg whitman's turn-around in the plan. speaking exclusively with whitman just a few moments ago,
10:08am
back to you, david. >> thanks very much, simon. of course, good days in the stock market have been hard to come by for the last year and a half. good quarters also very hard to come by. characterizing this quarter, the first fiscal quarter of 2013 as good. maybe a bit of a stretch. but it certainly was better than expectations. something we didn't get a chance to talk about during our live interview was the performance of the company's printing business. you know, they sell a lot of printers and an awful lot of ink. in fact, they saw an operating margin improvement in that business. it was quite significant. and really, one of the only sectors that saw a significant margin improvement. i asked whitman after our interview, but on camera again, why, and can it continue at printing. >> printing is not dead by any stretch of the imagination. particularly in the enterprise. and when i first came to hp, i recognized that printing was 30% of the profits of this company. so if printing caught a cold, hp would catch pneumonia.
10:09am
and so i've focused on making sure we had the right strategy in that business. i have to say the team is executing. >> executing to the extent that there are new products, new plans available to customers as well, that she at least believes is going to maintain if not increase that operating margin in a very important component of this company, as you heard 30% overall. something else i asked whitman about is that dell deal. remember the large lbo, of course, that may be in a bit of doubt, but likely still to happen at dell, a key competitor in a fierce market environment right now that is seeing significant declines overall, in consumers' willingness to buy pcs or notebooks. i asked whitman whether that lbo may be something that does benefit hp. >> uncertainty, and instability makes it hard for people to want to buy from you. particularly enterprise customers. because they're making long-term bets. and so when dell goes private with $18 billion worth of debt on the books, that creates
10:10am
uncertainty around customer support, around future product road maps. so we're going to use this advantage, we're going to use this opportunity in the marketplace to our advantage and we're going after dell's customers. >> interesting to see, of course, dell taking a bit of a different route there in terms of the commoditizing. you heard whitman during our interview saying we're going for the overall integration systems that are a part of all of the different devices that you have, and all the different form factors. overall, though, again, a good quarter for hp. a very strong stock price today. not to be forgotten also, produced $2.1 billion in free cash flow. so puts to rest some of those concerns perhaps about the debt load at the company which came down overall, the operating company, to $4.7 billion. scott, send it back to you. >> david, appreciate it very much. david faber out in palo alto. aig is also coming out with a big beat on fourth quarter earnings. mary thompson just got off the conference call.
10:11am
>> hey there, scott. the it was quite a conference call, about eight different executives to go through the numbers on aig. posting profits after accounting for losses linked to hurricane sandy and 90% of the aircraft leasing units. they earned 20 cents a share, well above expectations with a loss of 8 cents a share. revenue was in line with expectations. the once failing firm repaid its debt to the government and the treasury sold its last part in the stake last year. ben saying yesterday on the "closing bell," key to aig's improved operating numbers, better underwriting. >> our loss ratios for eight quarters now are slowly coming down. so the day-to-day results are terrific. and we had a couple of headline problems, which caused -- still with the huge loss of sandy, we still made a profit in the quarter. >> net premiums for the core property and casualty business were slightly lower than the year ago quarter.
10:12am
the investment portfolio helping to drive the improvement in the company's bottom line. also helping a tax benefit, the firm says it will continue to employ in the coming years. now, as aig continues with its recovery, benmosche said his priorities are to pay down debt. he said on the call, rating agencies would most like to see a few quarters of steady profit growth before giving basically the okay to aig to return capital to its shareholders. even as the firm progresses toward its goals, benmosche warned that because the firm missed internal goals, bonuses will be smaller this year. back to you. >> thank you very much, mary thompson. now, let's check in with josh lipton. what are you watching? >> hey there, melissa. the fda saying they approved a new drug by roach, now pays a
10:13am
royalty to immunogen. it's up about 1.7% here in early trading. >> after the break, two retail names shaking off the consumer warning signs. should you add either to your portfolio. we'll name some names next. google working on a self-driving car and computerized glasses. apple is holding steady with the iphone, ipad and desktop. so is google now the reigning king of cool? a tale of two techs still ahead. may not be with fidelity, s but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard and i helped create the fidelity guided portfolio summary. it's one more innovative reason serious investors are choosing fidelity.
10:14am
now get 200 free trades when you open an account. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display on the 2013 lexus gs. there's no going back.
10:15am
10:16am
retail earnings, abercrombie & fitch, a buy rating as well as nordstrom. great to have you with us. >> good morning. >> did you get a good sense as to why nordstrom took down its outlook for the year? >> a couple things. first, nordstrom is very conservative when they provide their initial outlook. if you look back this time last year, they had very similar type of outlooks. in our opinion, this has been conservative, not indicative of a slowdown in their consumer. >> what's the story with
10:17am
abercrombie & fitch? >> they have other things going on today. one of the things investors are talking about is the change in their accounting method. they're changing from the retail method to the cost method. it's complicated and people are trying to sort through that right now. >> why do you have a buy rating on the stock? >> for abercrombie, we think there's growth potential internationally. and domestically they've been able to turn the business in a pretty meaningful way. >> in the discussion about the two particular stock stories, we haven't mentioned the increase in the payroll taxes or rising gas prices. that seems to be the new thing, the new reason why analysts and companies are taking down their estimates. will that have an additional impact on these stocks and are you concerned about this in terms of how it impacts the other stocks you represent in the sector. >> for nordstrom we think it's more compactful. for abercrombie, it's something we're considering. obviously the lower the price point, the more the consumer is
10:18am
impacted by gas prices. they're impacted by refunds coming later. and they're also impacted by the payroll tax. >> what about the weather? the disruption we had in the end of last year. and perhaps more importantly, for parts of the country, it's been relatively mild so far. and presumably not forcing people out to buy for colder weather. >> certainly on this on an entire season basis was a disappointing winter. it didn't get cold early enough, and that's usually important for retailers. also something that's important is that spring came very early last year. that was a powerful driver across the space. springs don't get much better than last year's. >> you covered the mid-level department stores. >> we don't. we just cover bondton and nordstrom. >> would you think in general, though, that the payroll tax, higher gas prices, noise about the overall economy, sequester and what have you, would have a
10:19am
deeper impact below the level of, say, that nordstrom plays? >> clearly all of those issues impact the middle income consumer. one other thing we've been emphasizing is there's about a $30 billion gap in tax refunds paid to date this year, versus last year. that's because you could file later, or you were able to file later this year versus last year. that's another significant headwind we think people aren't talking about. >> why have nordstrom shares, i don't know, they've gone kind of sideways. >> i think there's still -- there's a lot of concern with nordstrom. they've been aggressively spending, canada, new york, so i think there are a lot of questions there. and investors are taking a wait-and-see attitude. this is something we'll watch as we go forward. >> all right. ed, thanks for your time. appreciate it. >> thanks. coming up next, meet the man who turned a broken iphone into a $1 billion business. and later on, the brand behind
10:20am
hotel giants like marriott, sheraton and westin. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade
10:21am
tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies. tdd#: 1-800-345-2550 i use their global research to get an edge. tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist intelligence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#: 1-800-345-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-800-790-3801 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox
10:22am
for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business.
10:23am
well, we've all been there. you break your phone and curse yourself for never bothering to back up all your data. in 2008, our next guest decided to fix the problem by starting a company, now a billion-dollar business. named to this year's rio 100, african-american leaders put together. great to see you. welcome to post 9. >> thanks for having me. >> great back story to this whole story. it sort of goes beyond the way we introed it. you're sitting as a musician one night. what happens? >> you think innovation stems from necessity, that is actually true. i was in the radio station 14-hour days. my phone crashed. out of pure frustration, it was formed. >> how about raising the capital to actually do it?
10:24am
>> it was most the most difficult things i've done in my life. it was in 2008. the economic system in the country -- >> the timing couldn't be worse, right? >> it was horrible. i had to put money into the company myself until re received funding. >> i would imagine 2008, this is a revolutionary idea. but now the cloud is common. i'm an apple user, and i back it up to the cloud. why do i need you? >> the good thing about that, i love that question. apple is all about making sure that your content stays within their infrastructure. cyber gives the data back to the consumer. take your content from an apple device and sync it to a blackberry or car system or internet running shoes. you name it, we allow the data to be yours. >> how big is the company now? >> we currently have 355 million subscribers, and 15 employees. >> what's the revenue stream? >> we don't talk about that. we're private. >> how do you get to the
10:25am
billion-dollars? >> we license our product to major telecommunications firms. we do revenue shares with them. so what we do is, cyber syncs, if there are 30 million people in the telco, we get 30 million people integrated into our software. >> where did you get your individual money to at least put the seed down to grow this thing into what it is today? >> i was really lucky in the music business, was able to save some money up. and was married for a year and i took all the money that we had in our nest egg and put it directly into the company. i'm used to eating ramen noodles and struggling here. >> was it okay with your spouse? >> she was totally okay with it. >> you have a very can-do attitude. from music to tech, and on that, you're launching a tv series, you're going to go out and look for entrepreneurs. talk me through what you feel about entrepreneurism in america now, and where we could go.
10:26am
>> i think entrepreneurship is the way to go. especially when you look at our generation. the job system really isn't there for us, the way we can generate wealth, not really talking about money, but opportunity, is to create that position for yourself. and then you're the engine that this economy needs. >> how do you take that into the grass roots? >> i don't think that you can teach entrepreneurship. it's either something you have in your soul, in your body, and what you can do is provide access to it. you can provide an opportunity for people to actually understand it. you either have it or you don't. entrepreneurship isn't for everyone. we want to make sure it's available to everyone, and everyone understands it. >> what's your game plan for this company? >> for cybersyncs? i don't think ipo is where we want to go. we're probably looking at merger and acquisition opportunities. >> so a takeover target potential? >> who are some of the entrepreneurial role models that you look to when you were trying
10:27am
to do all of this? >> one of my -- >> you wanted to be a musician. it's another thing to be a tech ceo. >> if you look at me, there are not a lot of people who look like me in the technology industry, so i had a hard time finding mentors i connected with. but scott case is one of those people that i actually did, the co-founder of priceline.com and current ceo of the miracle partnerships. with his help, he's actually allowed me the ability to understand what my place is, as a business owner, and as an entrepreneur. >> now you're the role model. >> i hope so. i hope so, yeah. >> wonderful. >> congrats. >> thank you so much. >> best of luck to you. >> thank you. has jcpenney struggles continues. are jobs being cut as part of that process. courtney, over to you. >> jcpenney is now 22 days into the four-year transformation. there's no denying it's been a tough year.
10:28am
the transformation shares down 47% since the first day the changes began. 950 corporate headquarter employees have been let go so far. the "new york post" reported that 10% of the remaining 3,000 employees at the company's headquarters in plano, texas, have been eliminated. however, while jcpenney is not detailing exact numbers, i can confirm the job reductions are much smaller than the "new york post" is reporting. i asked ron johnson about the reported layoffs on february 6th. here's what he said. >> there's a lot of rumors. we have like a rumor a day it seems like. like today there's a rhymer about layoffs at headquarters. we would never talk about that. but you've got to separate the fact from the rumor. and ultimately we need to have the right cost structure for the business, and we've got to grow. and we're going to assure we do those two things. >> jcpenney said as they enter the second year, they're making changes as the needs of the business change. we recently made a slight shift
10:29am
in the home office organization. layoffs, of course, typically done as cost-cutting measures. reporting fourth quarter earnings wednesday after the bell. they'll find out how much the transformation has cost. >> a lot of questions still, courtney. thank you very much. courtney reagan with the latest on jcpenney. boeing is taking its fix for the 787 dreamliner straight to the faa. but will the faa approve the fix in time to save boeing's investors. ♪ [ male announcer ] to hold a patent that has changed the modern world... would define you as an innovator. to hold more than one patent of this caliber... would define you as a true leader. ♪ to hold over 80,000... well that would make you... the creators of the 2013 mercedes-benz e-class... quite possibly the most advanced luxury sedan ever. see your authorized mercedes-benz dealer for exceptional offers
10:30am
through mercedes-benz financial services. [ babies crying ] surprise -- your house was built on an ancient burial ground. [ ghosts moaning ] surprise -- your car needs a new transmission. [ coyote howls ] how about no more surprises? now you can get all the online trading tools you need without any surprise fees. ♪ it's not rocket science.
10:31am
it's just common sense. from td ameritrade.
10:32am
let's get to the markets and the turn-around we're seeing from the two-day sell-off, the worst two-day sell-off this year. where are we in fact in this market rally? let's bring in mark, the chief investment strategist, and rod smith. where are we? what's your inclination in terms of the direction of the market, higher or lower? >> i think that it's important to put this correction in context. so we have definitely been in a two steps forward, one step back market for a while. and we've been in the clear two steps forward ever since the lows following the election in november. and many of your commentators, i think even myself included, over the last little while have said, yep, we've had a really nice two steps forward.
10:33am
we've gone up towards the old highs. and some suggesting if we got bad news we might get some sort of a pullback. but forren investor, this is not a bullback you want to do anything about. if you're literally a trader, you may well be wanting to raise a little bit of cash. as an investor you let the pullback happen and see if there's an opportunity following that, to either stay invested or get out a little bit. >> we saw the worst two-day pullback for this year. are these pullbacks at this point that you buy, one week away from the sequester potentially kicking in? >> it could be a little messy over the next couple of weeks clearly because of the sequester. and of course, in late march we have the continuing resolution which could effectively lead to a government shutdown. but that said, i do think you have to buy these dips. we've only had a 2% correction from 1530 on the s&p 500.
10:34am
nothing much to speak of. in fact, if it went down 3% to 5%, i think it would be healthy, and invite more moneys off the sidelines, which has probably been an overdue corrective phase in the market anyway. i think you stay long equities, because i think the scenario remains fertile for corporate profits to grow at a reasonable pace. >> what sectors of the market do you prefer at this point in time? >> principally three. financials, particularly regional banks, here locally in pittsburgh pnc is an example of one we like. we like the footprint d demography. halliburton is a ben faefactor the spend sector. and technology, business spending will come forward in 2013, as i think ceos are starting to gain a little more confidence about the visibility
10:35am
to the economic and fiscal picture. >> you know, it's reassuring both of you are so relaxed about what's going on. rod, what's your view of the assumptions we're making on growth? we've spoken about it a number of times on the program. there are many who believe we're able to rally on the belief growth will come back in the spring. if that doesn't materialize, then we have a problem. where are you on that, rod? >> yeah, i think that the u.s. situation is actually easier to be more relaxed about than the overseas one. although the overseas one is where the value is. so let's deal with the u.s. first. i do think that the -- i mean, let's understand what we're talking about growth. simon, you and i have had this conversation. i think we're talking about small amounts of growth. but i do believe that in the last quarter of last year, the first quarter of this year, you're going to see the slowest period in u.s. growth and you won't see the u.s. go into recession.
10:36am
outside of the u.s., you've had some very, very stimulative measures in japan, and there is a -- because that market has been the real winner, particularly if you haven't known the yen, the nikkei has been on fire. i think there's a lot of expectation for growth coming through in japan. and that really needs to be fulfilled in order for japan to go much higher. and finally, you've got china. i think that's probably where the biggest change is occurring, because there was anticipation that china was going to be a growth driver. but they're now getting worried about their property markets overheating again. and the shanghai, which has also been one of the big leading markets has fallen a lot. i think that concern is the concern over china, is more legitimate. i would back that japan would come through, that the yen will stimulate the growth and i'll bet you would see the worst of the growth slow down in the u.s. and by the second to third and fourth quarters it will be a
10:37am
little bit better. >> guys, thanks for joining us today. mark and rod. >> thank you. >> boeing is getting ready to present a plan for modifying the 787 dreamliner lithium ion battery. boeing says it hopes to get the planes back in service by late march. cnbc's phil lebeau joins us now. phil, is that an optimistic assessment in your view? >> it really depends on how quickly the faa makes a ruling and whether there are the lifting of contingencies. the prevention side, there's a battery redesign here. they're calling for separating the cells within the batteries a bit. adding insulation. reducing the chance of fires with those lithium ion battery packs. on the protection side, if there is an overheating, or a fire involving those battery packs,
10:38am
venting the fumes from that battery pack outside the plane, so they don't go in the cabin, and also containing and limiting the fire damage to that battery pack. remember, even if the battery goes down in one of these instances, on a plane, it can continue to fly. there are other sources of power in the plane. that's the broad sense of the proposal that boeing will be making today to the faa. the plan also calls for greater monitoring by the crews of batteries while in flight beforehand, afterwards, essentially really checking the batteries on a regular constant basis. boeing has worked with the faa hand in hand, really, since the beginning of this issue, more than a month ago in developing these battery solutions. the faa approval, by the way, we talked with a number of people and they're saying, listen, it could be a contingency approval, calling for more test flights. the faa said, okay, we think we'll eventually lift the grounding, but we want to see a few more specifics on test flights and making sure the
10:39am
modifications meet our specifications. shares of boeing, since january 17th, we are now in the 38th day of this grounding. this is now one day longer than the d.c. 10 grounding back in 1979. as you see from the chart, investors have continued to stick with boeing. it's actually -- >> in a market that's arguably risen more. phil, let me ask you about the desire that the crew check the batteries more often. aren't these batteries right at the bottom of the plane, near the landing gear? will they be crawling around during the flights? >> no, no, no. we're talking about sensors and monitors and checking it that way. we're not talking about them going into the belly of the plane during a flight. >> i'm trying to remember the bruce willis movie in which he did that and there were hijackers. for the moment, phil, we look forward to 1:30. thank you very much. >> you bet. >> that might have been that movie "air force one." >> oh, yes.
10:40am
i completely enjoyed it. >> you obviously did. let's get back to josh lipton for a market flash. >> well, maybe somewhere carl icahn is smiling right now. the website ripping higher here, forecast 2013 results above what the street estimates. analysts telling me this company brought in a new ceo last may. the company they say is really changing their ad strategy, effectively getting more transparency. carl icahn, the biggest shareholder on this one. web m.d. up 22% right now. >> all right. josh, thanks so much. carl's been quite active in doing well. after the break, find out why america's biggest lodging in real estate trust is optimistic after three rival ceos. host hotels president and ceo joins us next. plus, from self-driving cars
10:41am
to 3-d glasses, has google replaced apple with the new king of cool. the battle of the tech titans. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say?
10:42am
♪ if your a man with low testosterone, if you don't have something important to say? you should know that axiron is here. the only underarm treatment for low t. that's right, the one you apply to the underarm. axiron is not for use in women or anyone younger than 18. axiron can transfer to others through direct contact. women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these signs and symptoms to your doctor if they occur. tell your doctor about all medical conditions and medications. do not use if you have prostate or breast cancer. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet, or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count,
10:43am
headache, diarrhea, vomiting, and increase in psa. see your doctor, and for a 30-day free trial, go to axiron.com. with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
10:44am
to cap off a week in which three major hotel companies missed or lowered expectations, including marriott's ceo on this show. our next guest is more optimistic. the president and ceo of host hotels and resorts with a market cap in excess of $12 billion, easily america's largest lodging real estate trust. ed, thank you for joining us on cnbc. >> thank you, simon. good to be here. >> this is your first time on cnbc. let's make sure everybody is aware exactly of what you do. i want to show a map of manhattan as an example. you own a huge number of very large hotels. like millions of hotel owners, you then rent hilton.
10:45am
why are you more optimistic than some of the other people in your industry? barclays on the conference call yesterday said you were the most optimistic they've heard you when they're worried about the sequester. >> as i quentd to barclays yesterday, i had a feeling it wasn't so much that we were overly optimistic, it was just a bit more that people were surprised at how pessimistic some of the other folks had been. i think the reality from our perspective is, we've invested a lot in our hotels over the last three or four years, with over $1 billion of investment in our existing assets. not new acquisitions, but our existing hotels in just the last two years. over the course of the second half of last year, as group businesses continued to recover, we've been outperforming the industry. as we look at this year, while we certainly are as worried as others would be about the impacts of the sequester, issues that might come up around the
10:46am
extension of the debt ceiling, the reality is, the first six weeks of this year have been very strong. revenue per available room growth, which is a statistic we use in the industry to measure performance, was up over 9%. and we look at our group bookings for the last three quarters of the year, our group revenues are projected to be up 8%. >> and we saw figures on that just now. why is the west coast, l.a., seattle, why is it doing so well? >> i think you've got a combination of the economy in california recovering. you also have the fact that a big factor in our business these days is international travel. there's a lot of travelers coming in from japan, china and india, and a lot of those are coming to the west coast. >> yeah. the interesting thing about the way in which you run your business, and you get a huge amount of data from those that are running your hotels. this tradeoff between price and occupancy, can you explain to people why sometimes at the margin, you will push the price
10:47am
slightly higher, even if you lose rooms? >> sure, simon. the reality is, what we're trying to maximize is the room revenues that we get from the hotel. but of course, at the end of the day, what we'd like to do, if we can do it at a higher price point, it doesn't cost us any more to -- if we raise the rates by $10, all of that is profit. whereas if we sell an extra room, we have the cost of cleaning that extra room. >> yeah, because the biggest margin of cost to you is actually the cleaning of rooms. when you and i met when i was trying to persuade you to come on the program, we met at the westin on 42nd street. you were proud of the investment you'd put in there, as i attempt to raise the value of your property to drive the food and beverage. you had an interesting choice to make in improvements. in san diego, ball rooms, 10,000-square football room there.
10:48am
what is the tradeoff for you about investing now, to drive food and beverage and returning cash to your investors? >> overall, our investment decision, whether it's to invest in new buildings, whether it's to invest in enhancements or whether to buy back stock or increase the dividend, it's all an equation of looking at what's going to generate the best return. at some points in the cycle, which is what i would say where we are today, it makes sense to buy new assets or invest in our existing assets. there's other points in the cycle when pricing is too high, and maybe our stock is too cheap, where it makes a lot more sense to buy the stock and really buy more of our existing company in effect as opposed to buying new assets. >> just on that subject of the cycle and when properties will become more expensive, where are we on the cycle? how many years of growth in valuation do you think there are? >> i think this cycle is going to be much longer than the last one. the reality is that while we all would have liked to have seen
10:49am
stronger gdp growth over the last few years, the benefit as it were of this slower gdp growth is that new construction is still very low in the sector. it's still at levels that are less than 50% the long-term average. so until we see new supply accelerate above the long-term averages, which are slightly above 2% a year, i think the cycle's going to be extended. >> just before we let you go, ed, i want to talk briefly about the relationship that you guys have with marriott and hilton and starwood. you paid a percentage of your revenue to run your hotels. how would you characterize that relationship at the moment? because in the downturn it was rough. they were saying to guys like you, come on, you're contracted to spend a quarter of a million bucks a year on putting flowers in the lobby. clearly those days are gone. but at the margin, what do you do if, say, westin says, actually, we demand in our hotels you put a bottle of water free for every person in that room. what is the tradeoff for you? >> you know, i think first of all, i would say that our
10:50am
relationships with our operators are quite good. and i would say that if you watch what's happened over the last decade, those relationships have improved considerably, as both sides, especially the operators, have gotten more sensitive to the owner's needs in a hotel. when an operator asks to add an amenity to a room, we're going to evaluate it and try to decide if we think there's really a benefit, is it going to help drive more loyalty or a better rate. sometimes we say yes. >> come on, ed, you really don't want to put the bottle of water in the room because you have to pay for it. and they're not going to buy it downstairs. >> in a lot of cases, that's true. simon, one of our hotels wanted to put a manicure set in every room. we looked at them and said, there's just no way we could do that. that one didn't go through. >> i think what simon's somewhat alluding to is in the relationship that you do have with the actual operators of the hotel, the risk is primarily on your shoulders. just by the nature of these business agreements.
10:51am
that's why they're so liked, for lack of a better word obviously, by the marriott and the others. you have all the risk. >> well, we certainly have the bulk of the bottom line risk. now, most of our contracts are going to be set up with something called incentive management fees. so there is some sharing of the bottom line risk. we would typically have a priority return, then after that priority's been achieved, the operator has a chance to participate in profits. and i like that element of our contract, because it really does assure that the operator's going to be focused on the bottom line just like we are. >> ed, you were just upgraded by s&p overnight. >> our senior notes were upgraded to investment grade. we were split rated yesterday morning, yet evening, all of our debt is now investment grade rated. >> congratulations on that. the long climb back from a brutal 2007-2008 ed, thank you so much.
10:52am
>> thanks a lot. >> the ceo of host hotels and resorts. two big movers in today's action, coach, lowest level since august 19th, 2011. also take a look at hp shares. they have moved into the double-digit percent advance range. higher by about 10.5% here, almost 11% on hewlett-packard. between hewlett-packard and ibm, they are the the big reasons why the dow is in fact higher in today's session. coming up, a hack-a-thon at the white house. we have the details on president obama's silicon valley-like soiree.
10:53am
10:54am
10:55am
welcome back to "squawk on the street." it's friday. therefore, it's friday's i decisi edition of the "santelli exchange". the big issues of the day are all wrapped around debt and deficits. no matter how you want to spin it, how you want to deal with it, how you want to avoid it or how you want to get around it, these are at the epicenter. i think back, fannie, freddie,
10:56am
don't see many solutions. those are called government-sponsored enterprises. basically agencies of the federal government that were set up and the boiler-plate was, not guaranteed by the u.s. government. what in essence they were. now, let's think back to some of the new issues of the day, infrastructure bank. in the state of the union, the president called for this as something to build and save the country and the economy. now, let's also look at some acronyms. transportation infrastructure finance and innovation act. that will be expanded to, yes, rise of the zombie clones to create another agency very similar to freddie and fannie. it's going to be wholly owned government entity and it's going to be the infrastructure bank. it pretty much is not going to be government guaranteed. almost the exact same stencil of
10:57am
fannie and freddie. doesn't end there. l.a., always creative when it comes to finance. why? because they need the money. okay. so there's a product called aff bonds, america fast forward bonds. basically they're a hybrid security that's a lot like a build america bond muni. there's a subsidy, no technical guarantees, just like all the liability and loan guarantees of the infrastructure bank. but here's the part that really gets me above and beyond, i'll never believe any of that again, is that all of this, all of this is off balance sheet, off balance sheet. so let me get this straight. how do we start out? the phrase of the day, our debt and deficits, reducing them -- no, no, no. the new theme of the day is to get around it. do the same things all the banks were doing in the derivatives market, off balance sheet. think about it.
10:58am
is this a solution? are these the kind of solutions we need? you're going to be hearing a whole lot more of these. so buckle up. i think the zombie cage is going to have to be expanded. back to you. >> thank you, rick santelli. coming up, a company recognized by steve jobs as one of his very favorite apps ever. we've got the co-founder and ceo of the name phrased by jobs himself. this is $100,000. we asked total strangers to watch it for us. thank you so much. i appreciate it. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money? if your bank takes more money than a stranger, you need an ally. ally bank. your money needs an ally. you know it can be hard to lbreathe, and how that feels.e, copd includes chronic bronchitis and emphysema.
10:59am
spiriva helps control my copd symptoms by keeping my airways open for 24 hours. plus, it reduces copd flare-ups. spiriva is the only once-daily inhaled copd maintenance treatment that does both. spiriva handihaler tiotropium bromide inhalation powder does not replace fast-acting inhalers for sudden symptoms. tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. these may worsen with spiriva. discuss all medicines you take, even eye drops. stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. other side effects include dry mouth and constipation. nothing can reverse copd. spiriva helps me breathe better. (blowing sound) ask your doctor about spiriva. but at xerox we've embraced a new role. working behind the scenes to provide companies with services...
11:00am
like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business.
11:01am
that does it for us. scott, it has been great having you for the past couple of hours. >> great being here. i'll see you guys in another hour from the other side of the desk. >> simon will see you for the european close at 11:30. let's get to it. here's what you might have missed if you're just tuning in. i think the forward guidance is better. the asset purchases more potent. this is a monetary policy that really packs a punch. >> i'd like to see a better fiscal policy that put our tax and spending program on a reasonable path over the next -- >> you'd like entitlement reform? >> absolutely. if you did that, that would be a huge plus for the economy.
11:02am
>> i'm not going to go back into a world where all i care about is italian unemployment. just not going to go there. i worry about our unemployment. so does bernanke. 9. >> we really need to understand exactly what the challenges were and what the opportunities were going to be and then lay some pipe to set us up for a better 2013 in terms of products that are introduced in the market or go to market, our relationship with our channel sellers. you probably know the channel really built hewlett-packard. and then we'll see revenue acceleration as we go into 2014. >> you're watching the opening bell. >> overall, our investment decision, whether it's to invest in new buildings, whether it's to invest in enhancements or buy back stock or increase the dividend, it's all an equation at looking at what's going to generate the best return. >> made it to the end of this holiday shortened week. good morning. live at post 9 at the new york
11:03am
stock exchange, let's check on the markets on this friday. dow trying to get back what it's lost over the past couple of sessions. up almost 50 points to 13,930. s&p up at 1,507. darden restaurants citing the payroll tax increase and rising gas prices. and from the restaurant sector to the tech world, morgan stanley saying apple is likely to more than double its dividend after the analyst spoke with peter oppenheimer. morgan stanley saying apple can get around the issue of cash held overseas by funding payouts with debt rather than repatriation. hewlett-packard powering higher today. the biggest gainer in the dow after last night's earning report. hear what meredith whitney says. hear what meg whitman may be
11:04am
saying. and is the american consumer getting tapped out? and a company that was catapulted into fame after getting an dormant from steve jobs. he'll explain how he's trying to change the way people get their news. we're going to start with hewlett-packard. the shares are up today. profit and revenue down last quarter. but the results beat expectations. meg whitman telling david faber that hp is expected to see a pick-up in revenue in 2014 and she does not plan on breaking up the pc and printer company. david asked her for her reaction to competitor dell potentially going private and what that means for her business. here's what she said. >> uncertainty and instability makes it hard for people to want to buy from you, particularly enterprise customers because they're making long-term bets. when dell goes private with $18 billion worth of debt on the books, that's creates uncertainty around customer support, around future product roadmaps. we're going to use this advantage, this opportunity in
11:05am
the marketplace to our advantage and go after dell's customers. >> we'll get reaction later on from the analyst community. the markets trying to make a comeback. our next guest still says the s&p should exceed 1,600 this year. want to bring in doug mckay. doug, good morning to you. >> hey, carl. >> what a week it's been. we get the fed minutes, continued uncertainty about the degree to which q.e. has tapered off leading those to believe who follow what we call the tepper corollary, david tepper's thoughts on the market based on expanding q.e., where do we go now? >> i agree with that 100%. too far too fast collides with the first data points in housing that aren't necessarily up to expectations. then in the afternoon you get q.e. 3 potential end date. used to be open-ended. i thought, what's david tepper think about that?
11:06am
that's what happened. what i think it all means is, one, i don't think the housing recovery is over. i still think it's in its early stages. it's in pause. it's got to digest its gains. as far as q.e., the good news, i think if q.e. does come to an end, which at some point it will, it means the fed believes that the economy can stand on its own two feet. that should be a positive. >> when you're looking at 1,600 would be a little more than 6% above where we are now. what leads us to that? just raw economic momentum? >> i think so. it doesn't have to be animal spirits. if i told you 6% was the kind of return you'd see in an expansion historical, you'd probably yawn. but that's the new normal. i think we gradually move up to that. i think we are finally moving into an expanding economy where early cyclicals like housing and autos are finally responding. doesn't mean it's going to be lights out. the worst kind of markets to have are those where everything is going right and apple's going
11:07am
to hit $1 trillion market cap. that's when you have to be worried. >> what is the biggest risk to that model? is it an effect of rising interest rates on the national product. what is dangerous about the fed basically taking that punchbowl away? >> well, it reminds me of 1994 a lot. i lived through that. and i'm not exactly old, not exactly young. but that was my first bear market experience when the fed raised rates six times. it can cause some disruptions. so people should be aware of that. have that in the back of their mind. so these nudges from the fed are perhaps a good reminder that, watch out for bonds especially. but equities will eventually recover, even if they're hit at first. but i think that's something in 2015. >> you used to be a tech manager for ten years. and to spin this to google, facebook and apple, the troika
11:08am
that we love to talk about so much. you have different thoughts on all three. >> yeah, i own them all. i've owned google and apple since i started my company seven years ago. facebook's a new position we established around 22, 23. i think managing tech portfolios -- i think tech stocks are a lot like high-profile athletes. they have their moment in time. but michael jordan eventually retires. nothing against michael jordan. but in his wings comes lebron james and then the irvings under legion james. that's what i would paint with apple, google and facebook. apple is kind of michael jordan. its day in the sun has been great. at the end of its growth/growth phase, it's going to be an income-generating stock. it's a different animal. google's lebron right now. but i don't think with $1,000
11:09am
price targets thrown out there, it reminds me of $1 trillion market caps for apple six months ago and $1,000 for qualcomm. so i think google tamed the wild west internet frontier for us. but towns have been established and the facebooks for socializing the amazons for shopping and you no longer need google to get to those sites. that brings the stage for facebook. >> i didn't know you could still utter the name lebron james in cleveland but you certainly did. >> i'm from akron. we still like him in akron. >> doug, thanks for your time. have a great weekend. >> thank you, carl. >> let's get back to washington. the president holding a white house open day-to-day hack-a-thon today. he's inviting developers and tech experts to come and offer ideas. jon fortt has details. >> reporter: what the house is
11:10am
trying to do here is draw attention to the fact that they're releasing an api that will let anybody pull data from the white house about petitions, signatures and responses. later, they'll make the api available to make it easier to create and submit new types of petitions. the white house is taking a page from facebook and google's playbook, doing what they're calling a hack-a-thon to draw attention to in new open approach to data. hack-a-thons have nothing to do with digital burglary. in the lingo of computer programmers, a hacker is just a creative problem solver. think macgyver. a hack-a-thon is a track meet for software programmers. get them together, give them a problem to solve and a time limit, maybe 24 hours, maybe a week. give them sleeping bags, red bull, pizza, let them go. a scene from "the social network" here gives you the gist of a hack-a-thon.
11:11am
what the white house is doing here subpoena less like a classic hack-a-thon, a little bit more like a science fair. the engineers have had access to the api for a while. they're going to show what they did with it. i doubt they'll do shots. >> if they do, we have to get cameras into that. that's a must. thank you, jon fortt. google has a self-driving car, plus computerized glasses. apple has the iphone, the ipad, the desktop. is google replacing apple as the new king of cool? it is a tale of two techs. we'll talk about it after the break. rick santelli is crafting his "santelli exchange" for later on. hey, rick. >> yes, absolutely. the nfa had a meeting yesterday. the point of the meeting was to take a vote to embark on a process to banish ex-senator, ex-governor jon corzine. but it didn't turn out as many floor members anticipated. we'll talk about that process, what happened yesterday all from
11:12am
a commissioner that was there, james katuli zishgs, all at the bottom of the hour. generate in? with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. how do you keep an older car running like new? you ask a ford customer. when they tell you that you need your oil changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you.
11:13am
11:14am
industrials up higher in today's session, up more than 7% this year. josh lipton on one name seeing big gains today. >> check out gardner denver. the company is up for sale and
11:15am
it has attracted some interest. kkr submitting a bid. reuters reporting the takeover offer which values gardner denver at $7 billion, puts kkr in the position to buy the company after other private equity bidders abandoned the process. the company said back in october it was exploring options after an activist investor pressured it to sell itself. gardner denver up 4% right now. google, america's original tech darling, has had a steady climb up. what's at the core of this? jim cramer may have hit on the reason yesterday. >> whatever google do is hot right now. >> that got us thinking. is google steadily replacing apple as the king of cool? lance ulanoff joins us this morning. >> good morning. >> i tweeted and asked people would they rather own an i-watch or a google glass.
11:16am
most people said google glass because it actually exists. that says a lot about where that company is right now. >> it exists if you have $1,500 to spend right now. google's running a contest where you can apply to become part of the sort of expedition group. but essentially, you will only get in and then pay the money. that exists but google's pace of innovation for truly innovative products is sometimes rather slow. they've been working on this for years. no consumer is going to spend that much just to get these glasses. very small percentage. apple's innovative products tend to come more quickly to market for all consumers. i think the big problem is right now that apple has not introduced a truly innovative product in three years. >> and you have to imagine, they're at work on something. but dennis berman of "the wall street journal," you put google maps on. chrome is going a little more upscale. these glasses are apparently getting more stylish.
11:17am
does apple have to answer with something truly phenomenal? >> we have to recognize the google efforts for what they are, which is effectively marketing. it's very good marketing. you guys are showing the video, it's a very cool video. whether it actually at this point as a relevance to people's lives is a bit overstated, i think. but they're very good at marketing themselves as being the people who are creating these kinds of products. i think the real question is from a financial standpoint, how is google performing to -- not to microsoft but to apple. apple makes three times the revenues. google's margins are better right now. i think the question overall is who's really building the better eco system? and right now, i think you'd have to say apple is still a touch ahead. but google is gaining. >> right. lance, you probably agree with that, right? no one's going to come along and knock ios off its perch with one fell swoop? >> aeverybody says google has
11:18am
this product that you can get. but we talked about the price. if marketing were the key to success success, everything that microsoft is doing right now would be a huge cess. and that's not happening. you have to look at the physical products, the design, the innovation, the eco system, apple continues to say they sold millions of ipads and iphones last quarter. google is still trying to work its way into some of these categories. the chrome book pixel is exciting but it's not a success yet. google's big success, search, android, web browser which it beat microsoft on. i don't think right now -- google is cool and interesting but it hasn't blown away apple. >> dennis, how long can google give away -- or essentially give away the razor blades down the line? >> with the greatest
11:19am
profit-making machine of all time, it's not the razor or the razor blades. it's called the search query in the google search box. they're willing to subsidize the losses of motorola so it keeps the android eco system and that google search option open and available for those doing mobile searches. >> and that's what's taken us to $800? is that a legitimate reason to be at $800 a share? >> part of it is about keeping that search query and the search business fresh and germane and it's doing that right now. i think what you're getting with you're buying google stock, you're getting a little bit of the upside of the product set, as lance mentioned, the chrome book, glasses, a potential down the road. and we're seeing the motorola and android products come into being, too. as it moves into a hardware company yushgs buying on the option on the idea that they can penetrate that market overall. it's worth a few dollars per
11:20am
share for certain. >> is this how people talk about google in the tech world? out west, are they mentioning that they're gaining on apple's spot? >> i think people see the power that google has. i think they recognize that they -- not only solved search but they're in every mobile -- more mobile devices than apple is currently in. that's -- mobile is the key to success for so many companies. but as i've written, you don't count apple out. i don't believe that the i-watch or even the apple tv is necessarily the eye-popping innovation that we're going to see from apple, the thing that's going to turn heads this year. i think those are probably on the big whiteboard in the back room. but i've often believed something else is up their sleeves. whatever people are saying about google -- by the way, they still have mixed feelings about google because of the so-called -- they know everything about us, i think people have an affinity for apple and its products that is at a different level.
11:21am
>> we've asked for a look at that whiteboard. they've not given it to us yet. guys, thanks again. still ahead, the late, great steve jobs called this app one of his favorites. after the break, we have the co-founder and ceo behind jobs' praise. plus, the italians are set to head to the polls this weekend. if you think that doesn't matter to you, think again. we'll go live to rome with a look at why the election matters so much to the global markets. don't go away. [ male announcer ] this is not my home.
11:22am
there. i said it. they don't have pictures of my kids. they don't have my yoga mat. and still, i feel at home. could it be the flat screen tv? the not so mini fridge? ♪ the different free dinner almost every weeknight? or maybe, it's all of the above. and all the rest. am i home? nope. but it almost feels that way. homewood suites by hilton. be at home. a body at rest tends to stay at rest... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. plus, in clinical studies, celebrex is proven to improve daily physical function
11:23am
so moving is easier. celebrex can be taken with or without food. and it's not a narcotic. you and your doctor should balance the benefits with the risks. all prescription nsaids, like celebrex, ibuprofen, naproxen and meloxicam have the same cardiovascular warning. they all may increase the chance of heart attack or stroke, which can lead to death. this chance increases if you have heart disease or risk factors such as high blood pressure or when nsaids are taken for long periods. nsaids, including celebrex, increase the chance of serious skin or allergic reactions or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. do not take celebrex if you've had an asthma attack, hives, or other allergies to aspirin, nsaids or sulfonamides. get help right away if you have swelling of the face or throat, or trouble breathing. tell your doctor your medical history. and find an arthritis treatment for you. visit celebrex.com and ask your doctor about celebrex. for a body in motion.
11:24am
i'm wanting to show you some of the latest apps that have been out. pulse, which is a wonderful rss reader, if you haven't seen it. >> those few words from steve jobs were enough to put pulse on the map. at the time, the news reading app was only one month old. since then, it's grown to more than 25 million users around the world. we should note that cnbc content can be found on pulse.
11:25am
the co-founder and ceo of pulse joins us from stanford where he came up from this idea as a graduate student, what seems now like a long time ago. good morning. >> good morning. >> listening to that sound from steve jobs, any developer would give anything for praise like that. how did that change your life and the life of pulse? >> it completely changed my life in an amazing way. so when we developed pulse, we were just students here a stanford university. and we built this app as part of a class project. it wasn't meant to be a company. it wasn't meant to grow into 25 million users plus. we were still in school and we had no idea when steve jobs mentioned us as pulse as one of his favorite apps in one of his keynotes, that was a turning moment for us and for pulse as a company. suddenly the small little class project at stanford is now kind of overnight becoming this app
11:26am
that thousands of people were downloading. and in the last two years, it's really grown into one of the premier apps that people use to read their news on mobile devices. >> "time" magazine called it one of their top 50 apps of 2011. most apps -- most developers we talk to start with a free app and then try to migrate into a premium or paid app. you've gone the opposite direction, right? >> correct. >> why is that? >> we started off as a paid application. it was one of the things -- we went around in cafes and asked people would people buy this app. and keep in mind we were still students. we were still figuring out how to kind of put it out there. we found that in a short span of about six months, about 250,000 people paid $4 to buy this app. by that time, we had built all the systems required to build this and people use it at scale. and we got to a point where a lot of ideas in our heads were
11:27am
both on the fact that your close family, your friends, people you know about who are also reading on this platform and it's something you can actually discover what they're reading and sharing. that required us to go mainstream and go big. keeping it as a paid app was hindering that growth. we made it free by the end of 2010 and we've grown from 250,000 users to over 25 million users today. and really allowing people to connect on what they're reading together. >> that's what they call scale. you raised a good amount in your series a, total of $10 million. you've opened a new york office a couple of months ago. what is the plan from here on out? how big can you get and can you do that being public or private? >> yeah, i think for us, we're just completely focused on building an amazing product that people can use. in terms of where we can go, today, hundreds of millions of people still use the browser to go to different websites, to go to different places they want to get content from. so in terms of where we can
11:28am
grow, i think there's still this huge market, this huge potential for pulse to really become the window for people's content. and i think along the way, we've also experimented a lot in terms of advertising and how that should feel in mobile devices. and we have very strong pieces in terms of how that should look and feel. it should stay away from the web banner ads and these takeovers that have really destroyed the experience. we feel on mobile devices, ads should feel more like content. it should feel more engaging, something that people want to really read about. >> we hear about that challenge all the time. thank you so much. it's a fascinating story. please come back. >> thank you. thanks for having me. belles are about to sound across europe. we'll get the close with simon and talk about the week and the weekend they have ahead in a moment. to grow, we have to boost our social media visibility. more "likes." more tweets. so, beginning today, my son brock and his whole team
11:29am
will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex. [ male announcer ] fast, reliable deliveries worldwide. anbe a name and not a number?tor scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: scottrade- proud to be ranked "best overall client experience." omnipotent of opportunity. you know how to mix business...
11:30am
with business. and you...rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a
11:31am
30 seconds away from the close for the week in europe where weak economic sentiment, not too bad today. >> a phenomenal survey of german sentiment. jumping in one month more than we've seen in two years. the market appears to have reacted very solidly to that. germany continues to power ahead as the rest of the eurozone is -- >> the european markets are closing now. >> if you look at the figures, you might argue it seems to be something of an overexaggerated move.
11:32am
bear in mind that the data coming through is that a lot of people in europe have got systemically much shorter -- 50% more stock on loan and bets on the ftse have tripled and bets on the dutch aex have quadrupled, according to data we have from sunguard analytics. there's always the possibility for short squeeze. that may be what you're seeing today after the heavy losses earlier in the week. it is a broad-based rally, despite the european commission the eurozone will contract next year. it's interesting that we have got a rebound on the mining stocks after commodities were under such pressure earlier in the week. let me show you where we've traded for the week overall. you'll see the top 50 blew chues
11:33am
are flat after that climb-up and the big move lower. the bank stocks are doing well. some of the weaker bank stocks that are exposed to the periphery of europe, something else very important has happened today. it's become apparent that the private banks in europe are going to return about half of what we expected to the ecb in that second reclaim of the ultra cheap money that they gave away. the ltro money, 61 billion euros. that's a game changer for many in europe. the ecb is going to have more liquidity in the market whether it likes it or not. and those banks have to hang on to more cash than they thought. construction companies have also gone higher today. it's put a lid on the euro. that news on the ecb reclaim, some people suggesting this is a game changer, a much bigger phenomenon for the euro than the looming italian elections because it changes your view of ecb support and arguably the state of the banks. carl, back to you.
11:34am
>> thanks very much, simon. he mentions the elections. italians set to go to the polls this weekend. we want to go to rome now where we find our own michelle caruso-cabrera. good morning. >> reporter: because they owe the world so much money, carl. italy's the third most indebted country in the world after the u.s. and japan. 1.9 trillion euros to banks, to investors everywhere. and this election could be so inconclusive that the reforms here could stall. that worries investors that maybe they're not going to generate enough tax revenue over the coming years in order to pay back those debts. let's show you why this is so inconclusive. there are four candidates here in italy. two of them have criminal convictions. we put them on the screen in a particular order. luigi bersani is in first place. if you're a union member in italy, he is your guy. second place, the incomparable silvio berlusconi making an
11:35am
incredible comeback, even though he's faced convictions, sex scandals, et cetera. but he's still an incredibly deft politician and much loved by a certain part of the italian population. in third place, beppe grillo. and mario monti, the current premier, he is in fourth place even though he's done a lot for the italian finances. he's not getting a lot of credit from the italian people were having brought the finances below 7% down to 5%. let's tell you about beppe. he is a comedian. he traverses the country in a camper. he's the founder of what they call the five star movement. he's unbelievable. the things he says on stage are crazy. he's got tens of thousands people showing up at his rallies. he runs across the stage.
11:36am
he uses many obscenities to talk about the current politicians that are out there. and the italians who show up at his rallies love it. the video -- have we got the video of the rally? okay. you can see there were tens of thousands who showed up earlier in milan this week. we expect another rally like this tonight in rome. >> unbelievable, michelle. we were just chatting about -- only in italy, as pisani just said. we'll come back to you later on, michelle caruso-cabrera. want to point out the move in hp. intraday, up more than 10%. that is a six-month high. the leading gainer on the s&p after earnings and that interview with faber and meg whitman. >> only in italy could a comedian take third place. underneath the comedy and the funniness of the guy is a very
11:37am
serious vote against the existing structure over in italy. n definitely like a know-nothing party in a sense here. very interesting day. the volume much lighter than the last two days. we had the biggest volume in a long time as people lightened up on their positions. today it's the opposite, but much lighter volume. a nice, healthy pullback. these are the people that are in countries all over the world and they sell to many different industries. that's what you want to look at. look at the moves up. all up 1.5%. these have had a terrible last couple of days. textron, wesco, eaton. for the moment, they're saying the pullback is fairly shallow. i'll show you the building materials. tough week for the housing stocks as well as the building materials. owens corning was a little disappointing.
11:38am
they're getting more than 50% of what they had in the last couple of days. not getting much in the way of retailers. teen retailers had a tough time. abercrombie had cautious comments. this group has been a little bit moving sideways for a while now, even some of the big names here, the department stores like macy's and nordstrom have been underperforming the overall market. it's a mixed week on the stock market overall, talking about the global stock market here. down fractionally right now. japan's had a big week. germany held up. but the rest of the world has had a tough time of it. brazil, commodity-rich company, has been down. hong kong is down. china's had the worst week in a long time, more than a year, as the chinese try to find some way to deal with the overall inflation there by slowing down the property market. anytime you try to slow anything down in china, global markets get a little nervous. that was the main source of the problems with the stock market.
11:39am
>> looking what shanghai did overnight, kind of crazy. thank you, bob. the national futures association met to consider a lifetime ban of jon corzine from the industry. they're not taking any action right now. want to get to rick santelli in chicago with more on that. hi, rick. >> hi, carl. this is definitely a hot topic in chicago and should be a hot topic for anybody out there interested in trading markets that have regulatory bodies attached to them, which are all markets. welcome, james katulis. i want you to introduce yourself. hat number one, james katulis? >> director of the nfa. >> national futures association. three were added, is that correct? >> correct. >> what's your other hat? >> the president and co-founder of the commodity consumer coalition. i represent about 10,000 mf global victims --
11:40am
>> pro bono. let's start with hat number one. this place has been on fire for the last week or so thinking that they were going to walk in today and see that the nfa had a vote with a majority of over 14 to begin a censure process for jon corzine due to the activities he directed that brought down mf global. but i can't say that today, can sni. >> i can't comment on board deliberations. >> you can't comment. but i'm telling you what, i've read everything there is to read. i've heard every whisper and talked to everybody off the record. it doesn't look like any process is beginning today. what can you talk about regarding this process? people that are looking to see -- not to put this guy in a condition where he doesn't get a fair hearing, he isn't treated objectively. maybe he just wasn't that smart just like none of these other people that be prosecuted with all of these issues. maybe they just can't prove it. but what happens next?
11:41am
>> well, my hat number two, my professional personal legal opinion is that he's a criminal. there's public information -- >> don't give me this stuffer, jim. you give me this. but you're not standing here today -- you became a director on the direct platform to start this process, did you not? >> yes. >> and i respect the fact that you can't talk about it. does the cftc boss you guys around? the nfa was created due to the cftc, right? explain that. >> all of nfa's authority to bring disciplinary actions is delegated from the cftc. >> okay. did the cftc make phone calls here to stop this vote? >> i can't comment on that. >> did department of justice communicate with the cftc? >> i can't comment on that either. >> okay. let's go to your other hat. what are you calling up and telling these people a year and a half later -- once again, i don't care if he never has an issue affecting jon corzine. i just think there needs to be some closure here for people.
11:42am
>> i agree with you. and i think d.o.j. needs to do their job and prosecute him -- >> we're out of time. i'll tell you what, if i was in your role, i don't care whose authority you're operating on, if you just take the vote, they could say it doesn't count but at least you did something and a process begins. back to you. >> rick, well done. rick santelli in chicago. when we come back, darden restaurants warning on the quarter citing the payroll tax increase, rising gas prices. is this yet another sign the consumer faces some big troubles ahead? plus, in a world of netflix and amazon streaming, should the movie industry be worried? that story still ahead. but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year.
11:43am
helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ if your a man with low testosterone, suddenly, faraway places don't seem so...far away. you should know that axiron is here. the only underarm treatment for low t. that's right, the one you apply to the underarm. axiron is not for use in women or anyone younger than 18. axiron can transfer to others through direct contact. women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied
11:44am
as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these signs and symptoms to your doctor if they occur. tell your doctor about all medical conditions and medications. do not use if you have prostate or breast cancer. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet, or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. see your doctor, and for a 30-day free trial, go to axiron.com. but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard and i helped create
11:45am
the fidelity guided portfolio summary. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. "halftime" live from the new york stock exchange today. are the fed fears overblown? aaron gibbs tells us if you should keep buying what's working. is the consumer trade getting crushed? we're trading the retailers and beyond. and aig beats as the new darling of the hedge fund world. but not all our traders think the company is firing on all cylinders. big debate at the top of the hour. >> see you soon. darden releasing this video message to employees after warning on third-quarter profits this morning. take a listen. >> there are a number of things that we control and a number of things that are outside our control. and i expand upon those thoughts in a memo that i sent out this
11:46am
morning. in that memo, i talk about where our business is today, what we think we need to do going forward and how all of that really plays a part in providing great growth opportunities for you in the future. >> the memo otis references includes the economy, competitors and weather as things out of the company's control. and customer service and advertising as things within its control. joining us this morning to talk about that, larry miller, a restaurant analyst at rbc capital. good morning. >> good morning. >> that's not the first time we've had growth worries with this company. but the stock is higher today. the view among some on the street is, what else is new? classic buy on bad news. >> a lot were thinks they'd be forced to cut their dividend and they didn't. that's primarily why the stock is, not because of the performance in the quarter here. >> there's a lot of talk about the dividend.
11:47am
4.5%. to what level does that support the stock in terms of price? >> i think the stock probably doesn't go much below that 5% yield and that would translate to about $40. that's the downside. >> anything with a 4 handle, we're in pretty good position. what is he really pointing to, these vague things that are out of their control, like the weather? do you believe him? >> our view is the payroll tax would take a bigger bite out of industry traffic than people were realizing. if you look at the numbers and assume there's an equal cutback from consumer spending as a reduction to the payroll tax you're losing a point to a point and a half in industry traffic. there's certainly something to the tax refunds, that's hurting. weather was good last year. it isn't good this year. a lot of factors creating some news out there. but the payroll tax is having a pretty big impact. >> if it wasn't last summer, it was the summer before where we were looking at pricing
11:48am
mistakes, promotional mistakes. is there anything regarding execution that is at work here? >> well, there's a lot of other issues at darden that have caused them to underperform the industry. they've been having troubles at olive garden. i think the crux there is that they got a little lax on providing additional value to the guest and they just taking prize. so they sort of priced themselves out of the market. now you're in a situation where the consumer has less money. >> and of course the big problem with these guys is always if the issue isn't olive, it's hard for the other chains to make up for it because olive garden is so big within the company, is that true? >> that's exactly right. olive garden, more than 50% of the profits. that's where they make their money. >> you think it's fixable. i don't have your recent report or target. i think i see $58. is that where we are? >> we're going to be coming down. i think we're going to be moving down to $55. >> but the outperform, you're going to keep that? >> yeah.
11:49am
it's an interesting scenario with respect to the stock here. i think it's a win-win. the dividend is supporting the stock. and if it's not going to go down much below $40 and they're not going to cut the dividend, there's not a lot of downside. the worst thing to get from an operating perspective, the more it forces them to cut capex, which is what investors want to see. on the flip side, if things get better, the economy gets better, they'll do well, too. it's an interesting stock that's not necessarily related to the fundamentals here. >> for your space, it's definitely one that keeps you on your toes, no doubt. larry, thanks so much for your time. >> thanks. the oscars are this sunday. in a world where streaming companies are beginning to make their own content, what will the movie industry look like in ten years? that's next. ♪ [ male announcer ] it was designed to escape the ordinary.
11:50am
it feels like it can escape gravity. ♪ the 2013 c-class coupe. ♪ starting at $37,800. ♪ bob will retire when he's 153, which would be fine if bob were a vampire. but he's not. ♪ he's an architect with two kids and a mortgage. luckily, he found someone who gave him a fresh perspective on his portfolio. and with some planning and effort, hopefully bob can retire at a more appropriate age. it's not rocket science. it's just common sense. from td ameritrade.
11:51am
11:52am
skyfall is up for five oscars this weekend. but the real winner could be the individual who picks up what's featured in today's million dollar minute. >> the name is fleming, ian fleming, the creator of the james bond series. the ultimate collection of fleming's books is hitting the market for $1.5 million. >> each one of the copies is not
11:53am
only in genuinely superb condition but is inscribed by ian fleming. >> most people's love of bond starts with the films. but these 14 novels inspired it all. >> this notebook here, fleming was doing research for the no l novel. one of the items is this handwritten manuscript of louis armstrong. armstrong probably sang what i think is now the most beloved and famous of all the bond songs. >> maybe some years from now, we'll see adele's e-mail about skyfall. >> i'd be happy to see that now. >> what a treasure trove if you're a bond fan like i am. tell me more. what else is in this? >> we forget this all started with books, with the ian fleming books. this is like the rosetta stone of the whole bond franchise. these are the books that started it all and the first edition that is started it all.
11:54am
there's a book signed by ian fleming to james bond who is actually a caribbean or ornothologi ornothologist, a bird expert. the yacht if skyfall is available for sale for $14 million. it has an ejection seat, oil sprayer and the machine guns that pop out of the headlights. >> people say, why are you paying millions of dollars for books. there's something special about first editions, right? >> there are so many wealthy bond freaks out there. the wealthy can afford their james bond fantasies. the number of yachts named after bond. some wealthy collector will say, this is the real deal. for the real bond fan, it all started with these books and the
11:55am
covers -- the actual books are just beautiful. >> you have to think, the sale of these items, the timing is no coincidence, the franchise had a bit of a lull a few years ago. and skyfall is the most commercially successful yet? >> it is. what's interesting is the director went back and read the bond books and that sort of darker, more conflicted james bond is really the result of him, which is in skyfall, the result of him looking at these ian fleming books, the original bond character, and going back to those roots. the books and where it all started, i think that's where the real ae traction is. >> let's talk after the show. maybe we can pool some money. >> the boat would be the most fun. >> robert, thank you very much. we have some breaking news here out of washington regarding the sequester. want to send it over to john harwood. >> reporter: ray lahood, the outgoing transportation secretary, former republican member of congress, just walked into the white house briefing
11:56am
room and started outlining the consequences of the sequester cuts. it's to build pressure on republicans to compromise by agreeing to more tax revenue in a deal to avoid the sequester. ray lahood sid $600 million is going to be cut from the federal aviation administration. the traveler should expect delays of 90 minutes or more beyond what they're used to already in an attempt to galvanize the public and business travelers everywhere behind the white house position. they also said that perhaps 100 air traffic towers -- control towers in smaller and mid-sized airports are going to be shut down as a result of this. that's no accident because who tends to represent rural areas that have those smaller airport towers? republicans, both in the house and in the senate. so we'll see whether or not this attempt on the heels of others to warn about cuts to programs serving poor people and inner city children have some sort of an effect. but the white house is certainly
11:57am
trying to squeeze republicans. republicans are resisting, they're calling it the president sequester saying when is he going to get the congress to act -- senate controlled by democrats is going to consider both republican and democratic plans next week. and they -- both plans are expected to fail. there's no particular solution at this moment, carl. >> interesting that we're watching the secretaries of the cabinet now carry some of the water that the president tried to do himself just a few days ago. appreciate it. john harwood in washington. when we come back, we're live on the red carpet two nights before the oscars. we're back after a quick break.
11:58am
[ whirring ] [ creaking ] [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, what's next? [ zapping ] [ clang ] this is the next level of performance. the next level of innovation. the next rx. the f sport. this is the pursuit of perfection. the f sport. try running four.ning a restaurant is hard, fortunately we've got ink. it gives us 5x the rewards on our internet, phone charges and cable, plus at office supply stores. rewards we put right back into our business.
11:59am
this is the only thing we've ever wanted to do and ink helps us do it. make your mark with ink from chase. all stations come over to mithis is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. there. i said it. they don't have pictures of my kids. they don't have my yoga mat. and still, i feel at home. could it be the flat screen tv? the not so mini fridge? ♪ the different free dinner almost every weeknight? or maybe, it's all of the above. and all the rest. am i home? nope.